The new Conservative government is poised to go on a tax cutting spree.

Stamp duty and national insurance will be cut, and a planned corporation tax rise is expected to be reversed, in the Chancellor’s mini-budget on Friday.

​These tax cuts are both unfair and unproductive. Reversing the national insurance changes introduced just last year will disproportionately benefit wealthy households – while removing money desperately needed by the NHS and social care.

Cutting stamp duty is unlikely to do anything more than boost house prices.

While all the best evidence suggests cutting corporation tax will do little to nothing to stimulate growth. 

New research from our allies at IPPR shows that despite corporation tax being cut from 30% to 19% since 2007 in the UK, levels of private sector investment have fallen to the lowest among G7 nations.

Handouts for the rich

Our essential public services like the NHS, schools and social care are crying out for more money just to stay open – cutting taxes right now would be reckless to say the least.

If the government is serious about long-term economic growth that works for everyone, they should rethink their approach to tax. This has to include taxing the amassed wealth of the super rich.

Tax is about choices. The new government will make choices on Friday that will affect us all, potentially taking our country down a dangerous path of higher inequality and lower growth. It’s not too late to take a better path.


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​This week we were proud to see more than 150 people attend the launch of our joint report Tax as a Tool for Racial Justice, with Decolonising Economics and the Tax Justice Network.

The figures are stark. For every £1 of wealth held by a white household in the UK, an Indian household has 90-95p; Pakistani households have around 50p, Black Caribbean households have 20p, and for Bangladeshi households it’s approximately 10p.

This massive racial wealth gap was highlighted by research done by the Runnymede Trust.

Our joint report highlights how the UK’s deeply entrenched wealth inequalities are underpinned by our tax system. You can view a copy of the report here.

Nevertheless tax is one of the single most powerful means we share in common to fix the things that are wrong in our society.

For us it’s clear that tax must also be one of the tools we use to right racial injustice too. We will do more to tease out why racial justice matters to the work we do.

We also really want the report to be a tool to support campaigners, like our friends at Decolonising Economics, so tax can be as transformative of their work, as racial justice can be of ours. 

Today the new Prime Minister Liz Truss announced a huge cost of living support package estimated to be worth £150bn. It will freeze the energy bills of consumers and businesses from further rises. 

It’s good that the government is stepping in to protect us from soaring energy bills. This is why we all pay our taxes, not just to provide a safety net in a crisis, but to provide the foundation of a good life in happy times and bad.

The next question must be how will it be paid for? It appears Truss plans to add the cost to government borrowing. At the same time, the new Prime Minister has ruled out asking profiteering oil and gas giants to pay more.

Our analysis shows that UK oil and gas producers are predicted to make a staggering £51 billion in excess profits over the next year. That’s nearly four times more than the £13.5bn excess profits predicted in May. 

We’re calling for a 95% tax on these recording breaking profits, which would raise £44 billion a year for two years. This would go a long way to providing funds for the emergency package. Oil and gas giants need to pay their share. 
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As well as calling for a proper windfall tax, over the coming months we will be making the case that the ultra wealthy should pay more in tax as well. Since the start of the pandemic, the assets of the wealthy have ballooned. Now is the right time to tax wealth properly. 

Correction: We have updated this blog. In our original analysis we didn’t make a clear distinction between the revenue that would be raised under the existing system of taxing North Sea oil and gas, and the additional revenue that would be raised under our proposal for a new 95% excess profits tax. We estimate that under our proposal an additional £12.5bn of revenue would be generated each year for two years. The total revenue raised is estimated to be £46 billion.  

We are proud of the research we do at TJ-UK but we accept that if we do get it wrong, it is right that we hold our hands up. With thanks to Dan Neidle for spotting this error. 


​A 95% windfall tax on the excess profits of North Sea oil and gas companies could raise an additional £12.5 billion a year for two years, our analysis has found. This would drive overall government tax revenues from oil and gas profits up to £46bn a year, creating significant revenue to tackle the cost of living crisis.

New Prime Minister, Liz Truss MP, is poised to spend £150bn over two years freezing energy prices with speculation abounding about how the measure will be funded. 

Modeling by Tax Justice UK, found that a 95% excess profits tax to be introduced instead of the government’s Energy Profits Levy, could cover a significant proportion of the cost of living package that the government is set to announce.

Tax Justice Executive Director, Robert Palmer, said: “A bigger windfall tax to clawback oil and gas excess profits is a no brainer. The Truss government should impose a 95% tax on oil and gas windfall profits. This would provide substantial funds towards any energy support package.”

“A windfall tax on oil and gas company excessive profits would ensure that these companies aren’t profiteering during these difficult times.”
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The modeling is based on the £170 billion in excess profits that UK gas producers and electricity generators are predicted to make over the next two years as set out in a leaked Treasury briefing.
Notes

• This analysis uses North Sea Transition Authority and HMRC data on North Sea oil and gas revenues to average profits over ten years between 2012/13 - 2021/22, reaching an estimate of ‘normal’ average annual profits for the sector of approximately £5.1 billion.
• This is compared against Bloomberg News reporting of HMT analysis that shows £170 billion of excess profits over two years, across the UK gas and energy generating sector, where “about two fifths of the £170 billion in excess profits would be attributable to power producers.” 
• We therefore assume on this basis that 60% of £170 billion is attributable to the UK oil and gas sector, equivalent to £102 billion over two years. 
• Excess profits are therefore considered as £51 billion per annum minus ‘normal’ profits of £5.1 billion this equals £45.9 billion. 
• Under the current regime, £51bn would be taxed at 65% generating £33.2bn 
• If a 95% tax were applied to  excess profits instead of the Energy Profits Levy, this would generate £43.6 billion each year, for two years. 
• ‘Normal’ profits would be taxed under the previous regime at 40% adding £2bn, to generate total estimated government tax receipts of £45.6bn a year for two years. 
• This means that our proposal would generate an additional £12.5bn in revenue a year for two years. 

Business and the wealthy pocketed £40bn in tax cuts under Johnson, while working people pay for pandemic recovery.

Analysis by Tax Justice UK has highlighted how nearly £40bn was paid to business and the wealthy in tax cuts under Johnson, over the two and a half years up to his resignation, while taxes increased on working people. 

​A review of tax “winners and losers” across every Budget that took place while Boris Johnson and Rishi Sunak were in Downing Street finds that the Conservative government had given at least £35.8bn to businesses in tax cuts, and £2.2bn to the wealthy, before they both resigned last month. 

To date working people have contributed billions to the post-pandemic recovery, through freezes to Income Tax bands and the government’s National Insurance increase. Yet the mantra of Conservative candidates is that business should receive another bung of public money through further tax cuts. 

Tax Justice UK Acting Executive Director, Paul Hebden, said: “Tax is about political choices, and our analysis shows that Boris Johnson and Rishi Sunak gave tens of billions in handouts to business.

“The idea among some of the Conservative leadership candidates that the planned 2023 corporation tax increase should be reversed is perverse given that working people are currently the only ones on the hook for the costs of covid recovery.”


Notes:

Tax Justice UK has calculated all of the policy changes implemented from the Budget in March 2020 until the Prime Minister and Chancellor’s resignation at the end of June 2022. 

Using HMT Policy Costings we have estimated the amount of public funding actually distributed between four economic categories - personal, business, wealth and consumption - within this period through tax cuts, social security or spending. 

For the full figures please see here.  

The Office of National Statistics Wealth and Assets Survey recently found that “The wealthiest 10% of households held 43% of all the wealth in Great Britain in the latest period; in comparison the bottom 50% held only 9%.” 

The UK government has finally pledged to expose how much money is lost through overseas tax evasion. 

A huge £570bn is thought to be held by UK residents in tax havens, according to media reports.

HMRC faced criticism earlier this year after admitting they’d not attempted to estimate the extent of tax evasion by UK residents overseas.

The publication of the tax evasion figure – scheduled for next year – will be a big step in the right direction.

Once we know the extent of the revenue lost, we’ll have the ammunition to push for stricter rules and enforcement.

We need a fair tax system to support our public services, so that everyone benefits. Why should the super rich be allowed to stash their wealth abroad without paying their fair share? 

We also need to make sure that HMRC is properly resourced to go after the money lost to tax havens.

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The Prime Minister, Boris Johnson, announced his resignation today and vowed to use his last days in office to reverse the corporation tax rise planned for next year.

Speaking to the Times yesterday our acting Executive Director, Paul Hebden, argued that tax is about political choices. Businesses have already had a £25bn tax relief handout this year, without paying a penny more in corporation tax. 

Meanwhile millions of households have been asked to contribute more income tax and national insurance to pay for the pandemic. During covid the wealthy saw their riches soar, yet that wealth remains undertaxed.

​It’s unthinkable that a new Prime Minister would let big business and the wealthy off their contribution to our recovery, during a cost of living crisis driven by runaway profits.

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Fair tax councils win

Away from the topsy turvy world of Westminster, we have some good news to tell you about.

Preston Council has just signed up to the Councils for Fair Tax Declaration. This follows the 14,500 messages you sent to councillors across the UK.

Preston voted unanimously to encourage fair tax practices amongst their supplier businesses. They are also calling for greater powers to exclude companies with links to tax havens when buying goods and services.

This is a huge win for our campaign. And other councils are following. Southwark Council in London is expected to pass a Fair Tax Declaration motion next week.

Regardless of what's happening at Westminster, it’s great to see the cause of tax justice winning at a local level. 

Thank you if you’ve messaged your councillors – it’s making a real difference. You can still send them a message here if you haven’t already.


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The 2021 population census out this week found that, as a nation, we are both having fewer kids and are starting to see shorter life expectancy.

Average male life expectancy in thirty years could be 82.2 years, down from 84.1 years on 2014 projections. While female life expectancy could fall too, to 85.3 from 86.9 years.

Similarly, the data showed the UK birth rate is also dropping. Couples are predicted to be having 1.56 births for every woman, down from a 1.89 estimate in 2014.

Fewer school-age children means fewer schools will be needed, the FT’s Chris Giles pointed out. We’d still need to find an extra £35 billion a year in tax, but the new census population predictions mean this sum is far less than expected.

A dropping birth rate and life expectancy obviously have implications far beyond the budget deficit, however.


Austerity effect

The data raises important questions. For example, has 12 years of austerity pushed down life expectancy?
Research from the IPPR in 2019 estimated that austerity has led to 130,000 preventable deaths in the UK since 2012.

And is the falling birth rate a sign that younger people are putting off having children due to precarity and money problems? Research in 2021 suggested this might be the case.

Tax is about political choices. The new ONS figures might give us a glimpse of the effect of those choices.

If we want to live in a country where life chances for everyone improve over time, we need a tax system that reverses burgeoning wealth inequality – and funds the best possible public services.

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